The future of Australian property prices

trainspotter said:

Beware the Asian Invasion ... my @rse !!



http://www.news.com.au/finance/real...ion-just-hot-air/story-fnd91nhy-1226829064131

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Just because rules are in place doesn't mean they are being policed. It is illegal for people to sell drugs, but many still do and yes some get caught.

I wonder how many foreigners by vacant land and do develop within the defined period. Who is policing. I assume no one.

satanoperca said:

Just because rules are in place doesn't mean they are being policed. It is illegal for people to sell drugs, but many still do and yes some get caught.

I wonder how many foreigners by vacant land and do develop within the defined period. Who is policing. I assume no one.

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FIRB is data matching don't you know ? Every settlement is monitored and recorded as well as identity is checked by passports and birth certificates these days.

FIRB will also undertake a significant new program of rolling three-way proactive data-matching using FIRB data, State and Territory lands and property office transactional data and Commonwealth Department of Immigration and Citizenship (DIAC) visa status data.

"I can confirm that we have already started this program through trials in Sydney and Melbourne," said the Assistant Treasurer.

"FIRB has undertaken a pilot data-matching program between itself and both Land Victoria and the New South Wales Land and Property Management Authority, and we will now add a third leg to this process by incorporating Department of Immigration visa status data."

"This will be rolled out nationally and FIRB has this week brought on board a data-matching and compliance specialist to spearhead this program."

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http://ministers.treasury.gov.au/Di...0/074.htm&pageID=003&min=njsa&Year=&DocType=0

Value Collector said:

people here complain about high prices and then in the same breath scoff at the idea of living more than 50kms from the cbd of a capital city, and not only that, the want to live in a large house, and scoff at the idea of living in a cupboard sized apartment like the English ones they compare the prices of aussie mcmansions to.

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I think the point is that someone who works in any given occupation expects to be able to afford a similar house to the one their parents could afford if working in the same job. Not exactly the same, it would be further out due to population growth in the cities, but similar.

It's the same with anything. Someone born today will grow up expecting to be able to afford a car when they're an adult. If the price of cars, petrol, rego etc doubles relative to wages then they're going to feel decidedly unhappy with such an outcome.

trainspotter said:

Wanna know where all the money goes? To develop a 11 unit site just for Water Authority headworks fees is over $70,000 ... Electricty Supplier headworks fees is over $80,000 and this is just for them to look at the project and NOT actually install anything in the subdivision. No upgrading of meters or moving sewer connections nor installing a transformer on the property. Nuffin.

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Ah yes, the wonders of de-regulation of the utilities.

Prior to all this nonsense, if a sparky needed something connected then it was simply a matter of a quick phone call and someone turned up to do it, quite often the same day. Have the paperwork ready when the truck turns up and all good, nothing to worry about. And if it's just a query then no worries, someone will come out and have a look and we can meet on site to discuss it.

Someone will come out? Yes, I mean someone who knows about such things and can actually answer any likely question there and then. And if they can't answer it (eg does the existing line to the area have enough capacity for a 100 house sub-division to be built) then they'd just do a bit of investigation and come back with the answer.

Then some idiot decided that everything had to be disaggregated, made competitive ("competitive" being slang for "expensive") and that a myriad of paperwork had to be done. And that all contact goes through a call center where you'd be lucky to find a single person who actually understands anything beyond the basics.

So now you need to contact the retailer and also the electrical safety regulator and fill out plenty of forms. Then at some point the distributor gets handed the job, and if it's a "complex" one then it gets passed on to the design team who are guaranteed to charge a fortune. A couple of months later they'll come back with a design and a quote that will make your eyes pop out. Then you accept that quote and within a few months it all gets done.

As I've noted previously in this thread, the concept of actual efficiency has been almost completely lost in Australia amidst a desire to replace what worked with what sounds good. Water, gas, electricity etc are so intertwined in everything that the increasing cost of those services directly adds to the cost of doing practically everything thus making Australia less competitive. A point that few decision makers seem to grasp.

As for the broader economic situation, it seems to be unravelling alarmingly fast at the moment. Ford, Holden then Toyota all going and the announcements weren't far apart especially for the latter two.

Then Forge went broke whilst SPC struggles on only due to state government assistance.

Yesterday Alcoa announced the closure of 3 plants, an issue that would at least partly related to energy costs given that electricity is a huge part of the cost of aluminium production.

And now today there's media speculation that Shell have done a deal to sell their entire downstream assets in Australia, that is all the service stations and the only Shell refinery that they haven't already closed, to a new company which is expected to close the Geelong refinery.

A related key point is that Shell is essentially moving to pure resource extraction in the Australian context. Take it out of the ground and ship it overseas. Alcoa going half way down the same track. That says rather a lot about Australia's competitiveness - the only businesses which seem to be viable are those which for physical reasons are difficult to relocate (eg mining). Everything else is struggling at best. As another example, Rio Tinto currently has their entire downstream aluminium business for sale. They too see Australia's future as a hole in the ground rather than the production of something actually valuable.

Big job loss announcements coming not far apart one after another. Sounds awfully like the last recession to me.

Smurf1976 said:

I think the point is that someone who works in any given occupation expects to be able to afford a similar house to the one their parents could afford if working in the same job. Not exactly the same, it would be further out due to population growth in the cities, but similar.

It's the same with anything. Someone born today will grow up expecting to be able to afford a car when they're an adult. If the price of cars, petrol, rego etc doubles relative to wages then they're going to feel decidedly unhappy with such an outcome.

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There is a couple of problems with that though,

1, a lot seem to want to start where their parents finished, eg. There parents first home and early lifestyle would not be "good enough" for them

2, if the population grows each generation, something has to give, the land content gets more expensive, you'll have to expect higher density or move further out. If you try to maintain same density same location, it will be more expensive. It probably used to be possible to own enough land to keep a horse in parramatta once, not anymore, its irrational to think you can expect to use the same land content your great grandparents did.

3, some people want to live consumer life styles never saving and taking on debt to fund cars and holidays in their 20's and then wonder why they cant buy a mc mansion. You cant live a lifestyle of hyper consumption and still expect to be able to buy large capital items.

Value Collector said:

There is a couple of problems with that though,



2, if the population grows each generation, something has to give, the land content gets more expensive, you'll have to expect higher density or move further out. If you try to maintain same density same location, it will be more expensive. It probably used to be possible to own enough land to keep a horse in parramatta once, not anymore, its irrational to think you can expect to use the same land content your great grandparents did.

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smurf was already pointing that this would be further out

trainspotter said:

FIRB is data matching don't you know ? Every settlement is monitored and recorded as well as identity is checked by passports and birth certificates these days.
http://ministers.treasury.gov.au/Di...0/074.htm&pageID=003&min=njsa&Year=&DocType=0

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Come on Train, that was date 2010 and was a trial, I can find no mention that the trail was implement and resulted in new monitoring of the FIRB regulations through data matching. Geez, it should not be difficult to do. Just more bulls''t rhetoric form pollies that we are attempting to do something. Rather poor, I see that all political parties are protecting Australians futures. lol.

I can find no further mention that the FIRB laws regarding the purchase of residential property and being inforced. This is well within my expectations and very small sample of 2 Foreign investors that have purchased property in the last 12 months with any checks. I off to China again for a few weeks on business, I will ask my colleagues and suppliers what their perspective is on purchasing property in Australia without being a citizen.

I person think the govnuts do not care, it is all taxes and revenue for them. Property cannot go down, it is political suicide, it will never be a rational market.

Cheers

Value Collector said:

There is a couple of problems with that though,

1, a lot seem to want to start where their parents finished, eg. There parents first home and early lifestyle would not be "good enough" for them

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My parents started and finished in a very basic 3 bedroom house in the outer suburbs. That is all I want. That is what I am accustomed to having I don't need anything else. I don't mind an hour on the train. I can just read a book or use some computer device.

What I can't do is a 350k-400k mortgage that such a basic home will require.

satanoperca said:

Come on Train, that was date 2010 and was a trial, I can find no mention that the trail was implement and resulted in new monitoring of the FIRB regulations through data matching. Geez, it should not be difficult to do. Just more bulls''t rhetoric form pollies that we are attempting to do something. Rather poor, I see that all political parties are protecting Australians futures. lol.

I can find no further mention that the FIRB laws regarding the purchase of residential property and being inforced. This is well within my expectations and very small sample of 2 Foreign investors that have purchased property in the last 12 months with any checks. I off to China again for a few weeks on business, I will ask my colleagues and suppliers what their perspective is on purchasing property in Australia without being a citizen.

I person think the govnuts do not care, it is all taxes and revenue for them. Property cannot go down, it is political suicide, it will never be a rational market.

Cheers

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http://news.domain.com.au/domain/no...leave-to-buy-598000-house-20130327-2gu0p.html

Rules governing foreign ownership of Australian real estate have been proved a farce after authorities granted a fictional person leave to buy a $598,000 Melbourne house.

It took less than one business day for the Foreign Investment Review Board to sign off on a pending purchase in Vermont South by "Chodley Wontok", a non-existent Russian national with a non-existent Australian visa.

"You can imagine my surprise when the email showed up saying I was allowed to buy the property," said the applicant behind the stunt, who asked for his real name to be withheld. "The system is a joke."

The stunt has exposed a potentially serious breach in the review board's online application system, OREN, which was introduced in 2011 and is designed to streamline the process and lower compliance costs for the government.

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Mrmagoo said:

My parents started and finished in a very basic 3 bedroom house in the outer suburbs. That is all I want. That is what I am accustomed to having I don't need anything else. I don't mind an hour on the train. I can just read a book or use some computer device.

What I can't do is a 350k-400k mortgage that such a basic home will require.

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And these days that's considered cheap

sydboy007 said:

http://news.domain.com.au/domain/no...leave-to-buy-598000-house-20130327-2gu0p.html

Rules governing foreign ownership of Australian real estate have been proved a farce after authorities granted a fictional person leave to buy a $598,000 Melbourne house.

It took less than one business day for the Foreign Investment Review Board to sign off on a pending purchase in Vermont South by "Chodley Wontok", a non-existent Russian national with a non-existent Australian visa.

"You can imagine my surprise when the email showed up saying I was allowed to buy the property," said the applicant behind the stunt, who asked for his real name to be withheld. "The system is a joke."

The stunt has exposed a potentially serious breach in the review board's online application system, OREN, which was introduced in 2011 and is designed to streamline the process and lower compliance costs for the government.

- - - Updated - - -



And these days that's considered cheap

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Yes, found that article on MB. I find it quite amusing that the Chinese Dragon will one day rule the western world. Conquer by trade not force. I find it also amusing that I cannot by property in China as non resident/citizen.

I am sure glad I like Chinese food, because, as like the US, they will one day own us.

You can see how the indigenous people of this great land feel and it seems history does repeat itself.

Cheers

satanoperca said:

Yes, found that article on MB. I find it quite amusing that the Chinese Dragon will one day rule the western world. Conquer by trade not force. I find it also amusing that I cannot by property in China as non resident/citizen.

I am sure glad I like Chinese food, because, as like the US, they will one day own us.

You can see how the indigenous people of this great land feel and it seems history does repeat itself.

Cheers

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The whole of China is a bubble - get ready for the pop!

China’s new home sales last year exceeded $1 trillion for the first time as property prices in cities the government considers first tier surged in the absence of more nationwide property curbs.

The value of new homes sold in 2013 rose 27 percent from 2012 to 6.8 trillion yuan ($1.1 trillion), National Bureau of Statistics said in a statement today. New-home prices in December climbed 20 percent in Guangzhou and Shenzhen from a year earlier, and jumped 18 percent in Shanghai and 16 percent in Beijing, the bureau of statistics said Jan. 18.

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Here's some perspective of our very own debt financed 'not-a-bubble' bubble.......and this chart won't show the last 5 months of mayhem.....



http://www.google.com/trends/explore#q=Property+Bubble&cmpt=geo&geo=AU

satanoperca said:

Yes, found that article on MB. I find it quite amusing that the Chinese Dragon will one day rule the western world. Conquer by trade not force. I find it also amusing that I cannot by property in China as non resident/citizen.

I am sure glad I like Chinese food, because, as like the US, they will one day own us.

You can see how the indigenous people of this great land feel and it seems history does repeat itself.

Cheers

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Just like Japan and the Soviet Union eh comrade? Investment bubbles rarely end kindly, and China has a huge one.

More than that though, central planning has always proved to be horrendously wasteful and non-productive as an allocator of capital - China is no different, and only financial repression prevents insolvency and loss making enterprises from being realised. If investment bubbles are bad, centrally planned ones are probably worse due to the lack of return generated on silly projects and widespread corruption.

It would appear that "Chodley Wontok" is actually a journalist by the name of Leith van Onselen who also writes for the Unconventional Economist and for Macrobusiness. Leith has been squawking for years that property should be falling and it is a massive bubble.

Oh looky here he is bleating on about foreign investment and how the "excited young couples" are missing out on their dream home. More emotive words anyone?

http://www.macrobusiness.com.au/2014/02/foreign-property-investors-alter-social-fabric/

Every weekend in Sydney, young Australian couples are turning up at auctions excited at the prospect of finally owning their own home, only to find that other bidders are wealthy foreign buyers with money to burn…

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Ok so lets say "Chodley Wontok" has been "approved to purchase" from FIRB ... then what? Oh yeah that's right it has to go to a settlement agent or solicitor who WILL NOT settle on the property until they have established proof of identity (passport, visa, birth certificate) which then in turn is recorded with the relevant authorities (Titles office, State Revenue Dept etc) BEFORE a purchase can be completed.

Just FRICKING LOL at this one. A media beatup to suit an "economist" who has been rubbishing the "bubble" and has written volumes as to why it should burst ala Steven Keen style. Anyone fancy a walk from Kosciuszko ?

This assclown is lucky he is not sued for fraud IMO

trainspotter said:

Ok so lets say "Chodley Wontok" has been "approved to purchase" from FIRB ... then what? Oh yeah that's right it has to go to a settlement agent or solicitor who WILL NOT settle on the property until they have established proof of identity (passport, visa, birth certificate) which then in turn is recorded with the relevant authorities (Titles office, State Revenue Dept etc) BEFORE a purchase can be completed.

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You dont think it is easy enough to find a bent lawyer etc who would look the other way? Shouldnt that step be part of the FIRB approval? Verifying who they are actually approving? What if he was a known criminal? I hope/assume they run even a basic name check, but with this story i would doubt it

Mrmagoo said:

My parents started and finished in a very basic 3 bedroom house in the outer suburbs. That is all I want. That is what I am accustomed to having I don't need anything else. I don't mind an hour on the train. I can just read a book or use some computer device.

What I can't do is a 350k-400k mortgage that such a basic home will require.

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http://www.realestate.com.au/property-villa-nsw-werrington-116173787

3 bedroom, 2 bathroom, Penrith/Werrington area and $310,000. FHB Grant of $7000 and NIL stamp duty applicable. Settlement fees of approx $3,000 and lets say a 5% deposit and borrowing IO $294,000 = $320 per week.

Yep no way I can afford that !

prawn_86 said:

You dont think it is easy enough to find a bent lawyer etc who would look the other way? Shouldnt that step be part of the FIRB approval? Verifying who they are actually approving? What if he was a known criminal? I hope/assume they run even a basic name check, but with this story i would doubt it

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So FIRB is not infallible. A bent lawyer cannot suddenly produce passports or birth certificates? They have to be sent to the Titles Office prior to them transferring the ownership to the new buyer. Just to pick on one link in the chain is completely ignoring the balances and checks in place prior to settlement. I am sure a bank is gonna want some ID prior to tending settlement? Oh that's right ... all "foreigners" pay CASH

P.S. Is the story true or is a hack out there furthering his own agenda? I am sure FIRB would be taking a very BIG interest in this one !!

trainspotter said:

borrowing IO $294,000 = $320 per week.

Yep no way I can afford that !

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Purely out of interest as i have no idea; Were Interest Only loans common 20 - 30 years ago? I would of thought some principal was being paid off on the original loans back then but i could be wrong. What happens in 15, 20, 30yrs when you have only paid off the interest and still have a large amount of debt?

A couple would need to be earning at least 100k combined before tax to classify this as below mortgage stress, which i believe is 30%, if they were to pay $500 pw in order the eat into the principal

trainspotter said:

So FIRB is not infallible. A bent lawyer cannot suddenly produce passports or birth certificates? They have to be sent to the Titles Office prior to them transferring the ownership to the new buyer. Just to pick on one link in the chain is completely ignoring the balances and checks in place prior to settlement. I am sure a bank is gonna want some ID prior to tending settlement? Oh that's right ... all "foreigners" pay CASH

P.S. Is the story true or is a hack out there furthering his own agenda? I am sure FIRB would be taking a very BIG interest in this one !!

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My whole point is what role (if any) is the FIRB providing? Do they say to the lawyer/bank/title office; "We would like to see some ID docs when you have them"? Or do they simply rubber stamp anything in a single owners, private name?

If a fake name can get approved, what service are they actually providing?

prawn_86 said:

Purely out of interest as i have no idea; Were Interest Only loans common 20 - 30 years ago? I would of thought some principal was being paid off on the original loans back then but i could be wrong. What happens in 15, 20, 30yrs when you have only paid off the interest and still have a large amount of debt?

A couple would need to be earning at least 100k combined before tax to classify this as below mortgage stress, which i believe is 30%, if they were to pay $500 pw in order the eat into the principal

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It wasn't until the 1980's when deregulation occurred that IO loans became available. Why is it that everyone is so locked in on this 20 - 30 year loan thingy? An average loan lasts 7 years before refinancing or property sold ! Circumstances change. People change jobs, get married, die even. Nothing remains constant.

Can't argue with the maths on nett income/mortgage stress etc. How the hell do people pay of 600k loans then? Must be on BIG money to afford this kind of debt is all I can think of.

FIRB provide guidelines that are enforceable after the balances and checks have been provided by "others". I do believe this is their role to investigate every application. Every time I have dealt with them it is at least 60 to 90 days before you get an answer and usually it is requesting more information and always in writing !! To have "Chodley Wontok" approved via email in ONE DAY is remarkable to say the least !!

prawn_86 said:

Purely out of interest as i have no idea; Were Interest Only loans common 20 - 30 years ago? I would of thought some principal was being paid off on the original loans back then but i could be wrong. What happens in 15, 20, 30yrs when you have only paid off the interest and still have a large amount of debt?

A couple would need to be earning at least 100k combined before tax to classify this as below mortgage stress, which i believe is 30%, if they were to pay $500 pw in order the eat into the principal

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Pre mid 90s 15 year loans were fairly common

Then 25 year loans becamse the norm

With 30 years also acceptable.

Now it's 40 year loans.

If the only way for someone to get into the housing market is via I/O loans then REALLY REALLY need to be discouraged. That kind of loan leaves little left over for when something goes wrong.